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EUR/USD - Assessing the Consolidation and a Pending Breakout

EUR/USD is in a consolidation, or we can say a bullish correction in October, rallying from a low on the year near 1.25 to about 1.2886. Note that price is in the cluster of 200-, 100-, and 50-period SMAs which means price is at the crossroad. The 4H RSi has tagged 70, which shows bullish momentum, and the fact that it bounced off 40 shows that there was maintenance of the bullish momentum in October.

(click to enlarge)

In the 4H chart, we can see EUR/USD consolidating within the larger October range. There is a range from last week between 1.2886 and about 1.27. 

Bullish Outlook: Now if price pushes above 1.28, it would push above the SMAs and above a near-term falling line. This continues October's theme and opens up the 1.2885-1.29 area as the first near-term target. Above that, the daily chart shows a resistance pivot at 1.2995-1.30 area. There is also a falling trendline just above this area. Also, if the daily RSI comes up to 60, we should expect some resistance.  

(EUR/USD Daily Chart 10/20)

Bearish Outlook: If price breaks below 1.27, it could revive the bearish outlook, which we can see is very strong in the daily chart. This bearish continuation signal would open up the 1.25 low, but we should probably make sure it doesn't pull back above 1.28 first to make sure that the bears are really back in charge of the EUR/USD market. 

China GDP: We can see that price action has been tentative to start the week. There is a void of significant fundamental factors, until 10/21 Asian session, when we are expecting China's Q3 GDP report. Forecasts call for a growth of 7.2% over Q3 2013. This would be the lowest reading since Q1 of 2009, and can bring about some risk aversion. Risk aversion would likely keep the USD strong, and thus keep EUR/USD from a bullish correction. Now, we do have risk aversion, but EUR/USD manages to claw above 1.28, we should be even more confident that EUR/USD has further upside.